Invesco PowerShares’ CEF Income Composite Portfolio – the first ETF designed to provide investors access to a portfolio of closed-end funds – began trading on Friday on the NYSE Arca under the ticker symbol PCEF. The fund, which will issue monthly distributions, is expected to go ex-dividend on March 15, 2010.
“The addition of the PowerShares CEF Income Composite Portfolio (PCEF) broadens our innovative family of ETFs providing income-based investment solutions. Over the years, we have introduced the industry’s first insured municipal bond ETFs, first taxable municipal bond ETF, first laddered treasury ETF and the first ETF to invest solely in sovereign debt of emerging market countries,” said Ben Fulton, Invesco PowerShares managing director of ETFs. “We believe PCEF provides investors an attractive means to access a broad basket of yield-orientated closed-end funds through the benefit-rich ETF structure.”
The PowerShares CEF Income Composite Portfolio is based on the S-Network Composite Closed-End Fund Index(SM). The fund will normally invest at least 80% of its total assets in securities of funds included in the underlying index. The rules-based index is designed to track the overall performance of a global universe of US-listed closed-end funds. The index currently includes 71 closed-end funds, of which 27 invest primarily in taxable investment-grade fixed-income securities, 15 invest primarily in high-yield fixed-income securities and 29 primarily use an equity option writing (selling) strategy. PCEF is a “fund of funds,” as it invests its assets in the common shares of funds included in the underlying index.
Underlying index constituents are selected from a universe of approximately 350 closed-end funds and the index is rebalanced on a quarterly basis. To qualify for the index, a closed-end fund must have a stated investment objective of concentration in one of three sectors: taxable investment-grade fixed income, high-yield fixed income or option income; trade on a recognized US stock exchange; have a minimum capitalization value greater than USD100 million; have a total expense ratio of less than 2% per annum; and have an average daily turnover of more than USD500,000 per day for the three months prior to the rebalancing date.
